4 things you need to know about ERP systems!
There are many definitions of ERP systems, each of them emphasizing aspects related to planning and managing enterprise resources, which result directly from the expansion of the ERP abbreviation, i.e. Enterprise Resource Planning. Unfortunately, due to the relatively wide range of applications of ERP systems
What is an ERP system?
There are many definitions of ERP systems, each of them emphasizing aspects related to planning and managing enterprise resources, which result directly from the expansion of the ERP abbreviation, i.e. Enterprise Resource Planning. Unfortunately, due to the relatively wide range of applications ERP systems it is difficult to create a definition that would properly reflect the idea of operation, the meaning of existence and use of solutions of this class in enterprises. In search of a definition that most fully illustrates the justification and usefulness of using ERP systems in manufacturing companies, I decided to use a certain analogy, which in my opinion very well reflects what I was looking for. Namely, by comparing an ERP system to an operating system (e.g. Windows, Android, iOS), we will obtain, in a simple way, a very clear and at the same time precise and complete picture showing what an ERP system is for an organization. The operating system used in servers, laptops, tablets or smartphones is an essential and at the same time the most important element of the entire solution. Without the operating system, the equipment we have would be completely useless, because the operating system is responsible for planning and managing both all available resources and tasks performed on these resources, and the key aspect of its operation is the optimal (possibly most effective) use of available resources. Using this analogy in this article, I will try to demonstrate the essence of operation and the justification for using ERP systems in manufacturing companies in order to optimize the business processes taking place in them.
Why is an ERP system so important for an organization?
A properly implemented ERP system guarantees the proper functioning of the entire organization, allows for the management of all company resources in a thoughtful and controlled manner. It guarantees the proper flow of information in the company, enforces the proper flow of business processes and related documentation. The ERP system provides tools that allow for continuous monitoring of the current condition of the company, identifying irregularities and threats, and making appropriate decisions based on a proper and real (supported by reliable data) assessment of the situation. Additionally, the business logic mechanisms built into the ERP system should also ensure fast and efficient reporting and reporting necessary both from the point of view of the organization itself and its environment (contractors, banks, offices, etc.). Just like the operating system in the case of a computer, the ERP system in the company should provide all the tools necessary for proper operation and the most effective possible functioning in all areas of activity.
Kto potrzebuje systemu ERP?
The answer seems obvious. Every organization needs its own operating system to ensure its functioning. In the case of small, multi-person companies with a not very complex nature of activity, their operating systems can function on the basis of mutual exchange of information using simple tools such as e-mail, spreadsheets or other office applications. The key factor guaranteeing the proper functioning of such organizations is common and complete knowledge about all aspects of its activity. Companies with more resources, a larger scale or more complex nature of activity need a tool to support their daily work, both in the area of planning and implementation, supervision and control. In such a case, it is necessary to implement an ERP system that will take over the burden of proper communication and information flow, collection and processing of data related to the implemented business processes and ensure the right path for their implementation, and consequently facilitate the optimal use of resources available for their implementation and eliminate unnecessary delays.
When is it worth considering implementing or replacing an ERP system?
The answer is quite simple, but properly diagnosing the situation usually takes some time. Getting to the point. If the functioning of a company in any area of activity begins to fail and these are not incidental cases, we usually take action to verify the cause of such a state. If the reason is poor communication or its absence, unavailability or low reliability of data, improper flow of information or documents, poorly defined or planned task or lack of required resources (people, machines, materials), there is a high risk that the company's operating system has become inefficient. In such a case, it is a signal that shows quite clearly the direction of remedial actions. However, it is necessary to be aware that the problem was diagnosed much too late, because implementing a new ERP system is a time-consuming process and solving urgent problems will not happen overnight. Considering the above, much better diagnostics are necessary. So what should be the guidelines and what symptoms to look for? Below are a few examples:
- Once again, the deadline (of submitting an offer, delivery, payment, etc.) was not met.
- Production has been stopped due to lack of materials
- A large number of non-productive hours at workstations
- Too much occupancy at production stations
- High percentage of lost sales opportunities
- Production costs too high
- Unprofitable contracts
- Low quality of production and a large number of complaints
- Backlogs
- Lack of current information on the company's condition
- Difficulty in accessing reliable data
- Disturbed financial liquidity
In the case of companies in a phase of dynamic growth or planning to develop their business, the future needs of the company should also be taken into account in order to avoid a situation in which the ERP system will constitute a significant block in the implementation of the adopted goals and assumptions.